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Corporate Management Bonus Plan

Hi, I will be revamping our annual management bonus plan and I am looking for guidance on good survey/best practice data to use in determining target percentages, max payouts and the typical metrics/components of a management bonus plan. Open to any advice or guidance. Thanks.

Lori Kirscht 
Director Total Rewards at ABRA Auto Body & Glass 
https://www.linkedin.com/pub/lori-kirscht/7/68a/933

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Replies

  • For my money the best survey source out there for reporting target bonus percentages by position is Towers Watson's Executive and Middle Management Online Databases, respectively.  The reason for this is that they actually report a statistical breakdown of target percentages for short term incentive plans, and from a job design standpoint in terms of setting target percentages by job and level, this is exactly what you need.  My biggest beef with the Mercer surveys is that they tend to report average payouts rather than target incentives, which is not very useful for this purpose because all that does is give you a sense of average payout results, not target bonus percentages.

  • Hi Lori

    I had to do a search recently on that topic and I recommend you to contact AonHewitt and Towers Watson - both providers run global surveys on Variable Incentives.

    WorldatWork also has a report available on Incentives - "Incentive Pay Practices Survey: Publicly Traded Companies".

    Good luck!

    Catarina Simoes

  • Hi Lori,

    Bonus Plans aimed at a management population ought to align closely with Corporate Objectives, which in most organizations will be financially driven. Revenue and a Profit measure are two elements of a bonus plan that I have seen consistently used. These are often complemented by a Strategic Company-Wide Objective and lastly, a link to the achievement of Personal Objectives.  These elements may be weighted differently dependent upon seniority within the Company, typically with Executive pay being very closely linked to the Financial performance of the business and Junior management more skewed toward the achievement of Corporate and Personal Objectives, although still with the majority of a bonus being dependent upon Financial success. 

    A threshold needs to be achieved before any payment is made, followed by a sliding scale of achievement vs payout. For example, a 90% revenue achievement may equal a 75% payout for that particular bonus element but 100% revenue achievement equals a 100% payout.  

    Ultimately,100% achievement of all elements should equal a 100% payout .   

    Steve 

  • Hi Lori,

    You can get some information about target percentage, max payouts and also qualitative ones through Mercer documentation "TIMELY INSIGHTS ON SHORT-TERM INCENTIVES". Not expensive, just ensure it fits with your needs.

    https://www.imercer.com/products/2015/short-term-incentives.aspx

    Romain

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